Smaller companies spotlight

EACH week, former Fleet Street City Editor Patrick Lay keeps This Is Money readers up-to-date with a neglected, but exciting sector of the stock market - smaller companies.

The other Coutts

IT WAS two years ago that I drew your attention to an east London-based Aim-listed company, Coutts Holdings, the group that designs the units that display DVDs and videos in supermarkets, stores and large video outlets.

With the shares trading around 60p each this was not only a fine recovery play, but it also was paying annual dividends twice as large as was available from savings in banks and building societies at the time. A fine each-way bet, I suggested.

So good did the opportunity appear, that I recommended the Queen draw some of her savings from Coutts Bank and invest them in this similarly-named operation. If she followed my advice, the knighthood should be announced in the New Year's Honours.

For this has proved a sparkling investment. Coutts has just announced its interim results for the six months to 26 June in which turnover rose 3% to a fraction under £16m, but with pre-tax profits up £660,000 to £769,000, the interim dividend is raised 7% to 1.45p.

And, if that is not enough for shareholders, there is an offer on the table from Media Square, the marketing services company, worth 150p a share in cash, or cash and shares for those who want to retain a stake.

Coutts chairman, Robert Essex, who will become chairman of the combined group if the offer is successful, says the company has a strong order book and he expects the first half progress being maintained for the full year.

Northern Petroleum

MARK Watson-Mitchell, is a wily old investor and research analyst who, while not infallible (who is?), has the knack of getting close to smaller companies when they are ready to blossom.

So when I received the note on Northern Petroleum from his SQC Research this week I was interested to see he has set a target price on the shares of 20p by the end of 2005 against their current 7.5p.

I wrote in May about Northern Petroleum's 4.2-acre site on the Isle of Wight, bought for £9,000 an acre, and said it may prove to be one of the UK's largest onshore oil fields.

Mr Watson-Mitchell goes further, saying: 'The company has assembled a number of very interesting interests in key south-east England areas, centred upon previous oil discoveries, and it has been able to assemble a mass of data at extremely low cost, from which it believes that its new technology will enable it to establish commercial workings.'

He also says that the group's operations in Spain and Italy 'offer strong future potential' adding that the market is suggesting the Italian interests might be floated off into a new Ofex vehicle.

ASOS

IT IS only a week since I drew your attention to ASOS, the online fashion retailer again, in the 'Some to watch out for' section of this column, and what a timely reminder it has been.

This week ASOS chief executive Nick Robertson, told shareholders at the yearly meeting that sales were up 86% in the first five months of the current year and that 'the company had been appointed as the UK online retail partner for Miss Sixty, that it will become Egg's exclusive apparel partner in November and before Christmas ASOS.com will be live on Amazon as the preferred apparel partner.'

Put all these factors together and it is easy to see why Richard Ratner at Seymour Pierce is recommending the shares as a 'buy' at 66p despite the fact they have risen from around 6p since we first mentioned them last autumn and that they have gained 5p in the past week.

New issue alerts

ISRAEL-based Miras Imaging is raising £1.75m through an offer for subscription, and it intends to list on Aim. The funds raised will be used to strengthen sales and marketing of its video dental examination mirror in Europe and to finance entry into the US market, as well as to pay for continuing product development and pay off a bridging loan.

Established in 1999, Miras Imaging has developed and brought to market the MirroScope, a miniature self-illuminated video camera that is embedded in the handle of a traditional examination mirror. Advisers and placing brokers are Charles Street Securities.

Falklands Oil & Gas, the company formed in May to invest in an offshore oil exploration programme covering some 33,700 sq km to the south and east of the Falkland Islands, is raising up to £12m through a placing and public offer of shares, and then intends to apply for an Aim quotation.

The prospectus, when published, will be available from KBC Peel Hunt, 111 Old Broad Street, London, EC2N 1PH, who have been appointed nominated adviser and broker.

Some you may have missed

Petra Diamonds
Petra Diamonds is to set up a joint venture with BHP Billiton to progress its Alto Cuilo diamond project in north eastern Angola. Under the terms of the agreement, BHP Billiton can, by investing up to US$60m (£34m) in the joint venture, acquire up to 75% of the vehicle.

Billam
Billam, the investment company specialising in technology for the future, has invested £114,000 in TMO Biotec, part of a £1.5m fundraising exercise. TMO Biotec is developing technology that could revolutionise the way in which fuels, including biodiesel and bioethanol, are produced and which will 'drastically reduce' carbon dioxide emissions.

Premier Oil
It has been a good first half for Premier Oil, the independent exploration group, where profits after tax rose 13% to £14.5m and net cash balances, including Pakistan joint venture balances, more than doubled to £15.5m. Chairman Sir David John says: 'We are embarking on a very exciting multi-well programme funded from our sound financial base.'

The company also announced that Simon Lockett, currently director of operations, will succeed chief executive Charles Jamieson on his retirement at the end of this month.

Pharmagene
The first half of this year has been a 'period of progress for Pharmagene', says chief executive Dr Alastair Riddell, which has culminated with new agreements with Enzon and GlaxoSmithKlein announced today. The company reduced its loss for the period by £1.2m to £3.2m and there is cash in the bank of £19.1m.

Faroe Petroleum
Faroe Petroleum has been awarded six West of Shetland licences under the UK 22nd licensing round. The licences include 21 blocks and part-blocks covering 3,456 sq km.

Bioprogress
Bioprogress, the company that helps pills go down easier, has had one of its pending patents granted in Europe. The patent is for 'foamed film' where gas is blown into the film during production giving a honeycombed structure helping capsules dissolve rapidly.

Armour Group
Armour Group says in a trading statement that group operating profit for the year to end August 'will be in line with current market expectations'. The figures are due to be published on 26 October.

Huntleigh Technology
Healthcare group, Huntleigh Technology, reports an 11% rise in sales to £101m in the first half of this year with pre-tax profits up 27% to £14.4m. Chairman Julian Schild says the board has a 'positive outlook' for the remainder of the year.

Southern African Resources
Roy Pitchford, chief executive of Southern African Resources, reveals further positive results from the Leeuwkop drilling programme and is 'confident future results will further prove up the resource and facilitate that preparation of a bankable feasibility study.'

Jubilee Platinum
Following the completion of a trenching and pitting programme in Madagascar, Jubilee Platinum has revealed some particularly high nickel/copper values from certain areas.

Sherwood Group
Sherwood Group, the designer of lingerie, swimwear and nightwear, saw a 10% rise in sales to £13.4m in the first half of the year, but the group pre-tax loss of £3.8m (compared with £1m at this stage a year ago). Chairman Noel Jervis warns that margins are being squeezed due to severe competition in the sector. However, reconstruction of the lace business is nearly complete and £2.7m of cash has already been collected from the sale of fixed assets, and this is expected to top £10m.

Aquilo
Aquilo, the group that supports the motor and household insurance sector, reports a 20% fall in operating losses to £550,000 in the first half of this year and a 78% leap in turnover to £1.85m. Gross profits were up 117% to £883,000.

Red Squared
IBM managed services partner, Red Squared, is now trading on Aim having moved up from Ofex. Daniel Stewart is acting as nominated adviser and broker to the company.

Bema Gold
Bema Gold Corporation has arranged a non-brokered flow-through private placement of 1.25m shares at C$4 a share to help finance exploration at the high-grade Monument Bay gold property in north eastern Manitoba.

Centurion Electronics
Centurion Electronics is to supply its Plug & Play Blue portable in-car entertainment system to Citroen UK as an accessory across Citroen's entire vehicle range.

TripleArc
Having successfully integrated Access Plus, the business bought last November, TripleArc, the provider of IT to the print industry, has reported a £17m leap in turnover to £24m in the first half of this year and pre-tax profits of £670,000 compared with a loss of £250,000 at this stage a year ago. Chief executive Jason Cromack says the company expects to see the full impact of several major first half-contract wins in 2005.

XTL Biopharmaceuticals
XTL Biopharmaceuticals, the Israel-based biopharmaceutical company developing drugs targeting hepatitis, plans to adopt a more-US and Israeli board structure with only one executive member, Dr Martin Becker, chief executive, and five non-executive directors.

The latest installation of the FeONIC Whispering WindowT technology is at BT‘s new retail “store of the future” at the BT Centre in London. The window will play a range of music CDs, but it can be connected with any audio output, including televisions and DVD players.

Deal Group Media
Deal Group Media, the online marketing group, says its business has been transformed in the first half of this year by the merger with IBNet. Combined turnover was £6.55m in the first half compared with £878,000 by the former IBNet and there is a profit of £45,000 compared with a £623,000 loss by the former IBNet. Further progress is expected in the second half.

Some to watch out for

Enterprise
Stephen Rawlinson, analyst at Arbuthnot Securities, reiterates his 'buy' recommendation for Enterprise, the Aim-listed support services group, at 301p following the interim results, which were ahead of his expectations showing turnover up 44% to £199.2m and pre-tax profits 28% better at £7.7m. Owen McLaughlin, chairman of Enterprise says: 'Trading is continuing strongly and enables the board to have confidence in our prospects for the second half of 2004 and beyond.'

Glisten
The 33% leap in sales to £20.8m and 32% jump in pre-tax profits to £1.8m by chocolate and sweet maker, Glisten, has caused Roger Tejwani at Daniel Stewart to continue his 'buy' recommendation for the shares at 258p. He says his model shows a 19% compound growth in earnings for the company between 2003 and 2006.

Martin Shelton Group
SQC Research says that benefits from the new management team at Martin Shelton Group, the maker and supplier of diaries, calendars and advertising business gifts, 'will be seen very quickly'. The 'buy' note says: 'This little company has massive upside if its management gets its sums right, against which it has sufficient tax losses to cope with the next three years' profits.' It sets a price target of 40p by the end of 2005 against the current 25.5p.

Xaar
The worldwide market recovery in the digital printing market, coupled with increasing applications for inkjet, offers strong growth prospects for Xaar, says Richard Lucas, analyst at Corporate Synergy. He says the shares are a 'buy' following a strong set of interim results.

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